We are taught from a young age to work hard and acquire as many assets as possible in preparation for retirement.
But there is a major and potentially tragic flaw with this strategy.
When you own something, it can be taken away from you.
Why?
Because you own it.
Which makes everything you own titled in your own name a contingent asset.
Why contingent?
Again, because someone else can take it away from you.
Which is precisely the reason why the wealthy enjoy 100% use of assets with 0% liability of ownership.
“Sorry, we don’t own this home, we just live here.”
There are many circumstances under which you could be sued, from an automobile accident to a simple slip-and-fall on your property.
All it takes is for a jury raised on benefits and entitlement to rule against you and award your money to someone else.
And you are now a pauper.
The idea is to become a “paper pauper” before trouble can strike.
The solution is an asset protection trust.
And not just any kind of trust, but an irrevocable trust.
The only kind that is truly bulletproof.
Let us consider a couple of stories to illustrate the perils of personal ownership.
Sued From Beyond The Grave
Tom’s dad had been a “real estate guy” who owned some houses that he rented to tenants who agreed to be responsible for various duties, one of which was to clean the snow off of the property.
The homes were located in Pittsburgh, PA where winters can be pretty snowy.
One tenant upon tackling the aftermath of a particularly vigorous snowstorm slipped while shoveling, fell and broke her foot.
The injury required an operation which her doctors botched, leaving her with a permanent limp for the rest of her life.
Can you imagine where this story might be heading from here?
Tom’s dad owned those rental homes titled, not in the name of an entity like a Limited Liability Company (LLC), but in his own name.
Which meant that those houses were as much his personal possessions as his socks and his golf clubs.
Since America is the litigation capital of the world with more circling land sharks (we call these people lawyers) per square mile than anywhere else on the planet, rather than take responsibility for her own injury, the tenant naturally contacted her attorneys to pursue legal action.
Just as this asset hunting party was getting warmed up, Tom’s father tragically passed away.
Tom and his siblings sold the rental houses which became part of their dad's estate which would now have to be probated because he had died without a trust or a will.
[Die without at least a simple will in place and the law requires that the courts probate your estate to determine how your assets will be divided among your heirs once you have assumed room temperature.
Extracting huge fees from processing the former assets of the deceased is a major cash cow for the legal profession.
Which is why when Norman Dacey published his blockbuster book How To Avoid Probate in 1965, the American Bar Association rose up as one to try to stop publication, pursuing Dacey all the way to the United States Supreme Court.
Fortunately, the book was published and has since saved millions of everyday American families countless billions in attorney fees.
Unfortunately, Tom’s was not one of those families.]
Continuing with our story, the aggrieved tenant's attorneys were coaching her to sue everyone in sight, including Tom’s deceased father who was now being sued from beyond the grave!
The law firm had been more than happy to take the case on a contingency basis (no retainer required) since they would receive a third of whatever booty could be unearthed (sorry).
While this drama was being played out, and while the judge was trying to determine what to do, neither Tom nor his siblings could touch their deceased dad's estate for almost two years while wondering whether they would ever see a penny from the settlement.
Thankfully, the judge finally dropped their deceased dad from the case.
What did the lawyers do then?
Naturally, they went after the doctors.
From Her First Home to Homeless
Emily was in her mid-30's, recently divorced and living with her young daughter in the foothills of the White Mountains in New Hampshire in her very first home.
Emily had a great job as a graphic designer and could easily work over the Internet from her home office while caring for her young daughter.
One night with friends coming over for dinner to celebrate her new “dream home,” Emily suddenly realized that she was out of wine.
She bundled up her daughter, strapped her into the child safety seat, hopped behind the wheel and rushed off to the local liquor store, singing along with the radio and smiling at her daughter in the rear view mirror.
Emily was a safe driver with a perfect driving record.
Yes, she knew she was driving a little too fast, but she had to get to the store and home before her friends arrived!
When a traffic light turned yellow, Emily sped up just a little… which is when a car full of teenagers pulled directly into her path.
Emily slammed into the driver's door.
The impact jolted her so badly that her vision was blurred for a moment.
Thank goodness her daughter was fine, but the other driver must have been unconscious because the passengers from the other car were screaming "Terry!"
And Terry wasn't moving.
Emily was in total shock.
The police arrived, papers were exchanged and Emily's car was towed. She called a cab and took her daughter to the local emergency room to have them both checked for concussions.
Three days later, the phone rang.
It was the lawyer for the parents of the teenage driver.
It looked as though Terry was never going to drive a car again.
Terry was in a coma and on life support.
His parents were suing Emily for the millions of dollars that Terry would never be able to earn.
Their lawyer had run through public records databases and confirmed that Emily was the sole owner of the house that was titled in her name.
It wasn't long before Emily had her dream home taken away from her in a lawsuit.
In one terrible instant, a fun evening with friends had turned into a nightmare.
And with no family to turn to, Emily and her daughter were now homeless.
All because she had owned that house titled in her own name.
Had Emily known one of the most elementary principles of asset protection familiar to the wealthy, she would still be living in that dream house today.
A Simple Slip-And-Fall
You invite me to a Fall cookout at your place.
I run into the house for some more ice, slip on the braided rug in the foyer and smash my face into the banister at the bottom of the stairs before I can get my hands out to protect myself.
I break my jaw, crack my skull and lose three teeth.
After receiving emergency treatment, I start getting splitting headaches and am diagnosed with TMJ.
My insurance post surgical co-pays come to $50,000.
The dental work alone will cost over $10,000.
I am in constant pain and can’t work.
My lawyer says I have no choice but to sue you for negligence, damages, loss of future income, pain and suffering, etc.
You are forced to file bankruptcy and you lose your house since neither state nor federal homestead exemptions will qualify.
Why did this happen?
Because you owned the house titled in your own name.
